Port Pirie smelter operator, Nyrstar, has launched legal action to quash a rate hike by the local council which has left the company with a $1.34 million hole in its bottom line.

Key points:

Port Pirie lead smelter, Nyrstar, has been given a council rate increase and says its eight properties were given a combined bill of $1.34 million

The company filed court action against Port Pirie Regional Council stating it "had no legal basis" to enforce the rate and that the increase was "unlawful, invalid and ultra vires"

South Australian Treasurer, Rob Lucas, has called on the council to explain the situation, stating further costs for the smelter could threaten redevelop and job security for Port Pirie

The court bid comes as uncertainty continues to cloud the company's future, with pressure continuing to mount over unpaid debts linked to a $291 million loan, underwritten by the State Government in 2014.

PPRC created a new rate category which only applies to the Nyrtsar business.

When it was enforced Nyrstar's eight properties were given a combined bill of $1.34 million.

Nystar paid first-quarter payments on the bill and lodged an objection.

In court documents filed in the District Court, Nyrstar said the council "had no legal basis" to enforce the rate and "…the Nyrstar rate was thereby unlawful, invalid and ultra vires [beyond authority]".

Council documents stated that the rate change aimed to secure about 8 per cent of the council's total rates revenue.

The new rate category is about ten times that of a residential property.

It is not uncommon for councils to set different rates for different types of property.

PPRC would not comment on case specifics today released the following statement:

"We respectfully advise that ahead of a routine council meeting tonight and further discussion, the council is not in a position to make any comment at this point in time. It looks forward to providing further information as and when it becomes available."

Nyrstar released a statement which said it hoped "… to resolve this matter in discussion with the council, without needing to take steps to prosecute the proceedings".

Concerns over local operations

South Australian Treasurer, Rob Lucas, called on the council to explain the situation.

"I think the council has to justify if they've significantly increased the cost on their major local employer. They need to explain publicly why they're doing that," he said.

"Anything that makes the viability of the Nyrstar project more difficult I have concerns about.

"The last thing we want is any addition costs being heaped on Nyrstar in Port Pirie which might threaten a very necessary redevelopment and therefore threaten jobs in the community."